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The pioneers of cocaine wine took out the cocaine, then the wine, then called it Coca-Cola. Can publishers of classified advertising directories – the big fat books on every hall table – pull off a similar reinvention?

The market says no. This week has seen a fresh round of falls. Yell Group, the heavily indebted UK publisher, is down to a wretched two times forward earnings. Seat Pagine Gialle, the Italian yellow pages publisher, dropped to three times earnings as it was forced to deny reports it was about to trip covenants. The biggest US players, RH Donnelley and Idearc – just over one times – have been on their knees since March.

Cyclical concerns are only part of the story. The real problem is the internet: online search is faster, handier and more information-rich. Alongside devices that can bring up maps and user reviews in an instant, hard-copy search engines – updated once a year – look as anachronistic as cheap CD cases in an age of digital downloads. It is telling that directories businesses with successful online arms – such as France’s PagesJaunes, with about a 50 per cent online market share – have escaped the worst punishment.

True, sentiment is running ahead of reality. Thanks to heavy reliance on pre-booking ads, the most recent sets of numbers were more resilient than equity valuations suggest. And it is possible that the traditional publishers can stabilise print products long enough to get their online acts together. But on the cusp of an advertising downturn, many of the stocks are looking precarious. Yell, for example, has a loan covenant set at just over four times net debt/earnings before interest, tax, depreciation and amortisation, for 2010. Assuming a basic level of investment in the business, the group would need revenues to slip by less than 1 per cent to get uncomfortably close to a breach.

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